A Dispute Resolution Process in Contracts

Aug 14, 2017

The subject matter in technology can change so quickly that the technology laws have recently attempted to create frameworks to resolve problems rather than creating specific rules that could become obsolete. Accordingly, even the the best drafted technology contracts cannot address every possible problem that could arise. A technology attorney can help software developers, website designers, managed service providers (MSP) and others who work with software and professional services agreements to establish a framework to resolve problems.

Such clauses in contracts are often referred to as Dispute Resolution clauses. Without such a clause, if a problem arises where the parties are at an impasse or there is a clear breach, then the issue can quickly escalate to costly and time consuming litigation. Instead, the parties can develop a mutually agreed framework to resolve issues step-by-step in a productive manner.

Here are a few examples that can be described in more detail in contracts to address problems in stages to prevent quick escalation and incentivize the parties work toward a solution: 

  1. Escalate the issue through the chain of command internally. Sometimes it takes getting the right representatives from each party to resolve a problem. 
  2. Engage legal counsel in a formal negotiation. Consulting with internal or external counsel can help the parties articulate their positions and work toward solutions.
  3. Require a mandatory formal mediation with counsel representation each party. Sometimes, a third party can help find a mutually agreeable solution. After all, some judges may require that the parties mediate an issue before the judge will even hear the matter. 
  4. Decide on an independent arbitrator. The location of an arbitration, whether it will be a single arbitrator or a panel, and under what rules an arbitration would be conducted can all be decided at the time a contract is formed.

The best example of the right framework is where the parties collaborate to create their own customized dispute resolution clause. Setting a clear process to work through a problem can help diffuse a problematic situation. Working with an experienced technology attorney familiar with drafting dispute resolution clauses into contracts can help prevent problems from escalating to the point of litigation and could ultimately save a company time, money, and valuable customer relationships.